Disadvantages of Online Credit Services -
Internet Security

Online credit services may seem like a convenient way to obtain financing,
but can prove devastating to your finances and your identity if you do not
take proper precautions. The internet provides two primary benefits
to the perpetrator of financial and identity theft crimes: access and
anonymity. The internet enables a thief or shady operator to anonymously
contact thousands of individuals using multiple access methods such as
email lists, free for all (FFA) pages and spyware with blinding speed,
acquire personal or financial information, and just as rapidly disappear.
The task of the internet thief is made easier by the fact that most
internet users are unaware of the security risks inherent in an
internet connection and are often gullible when it comes to believing the
claims made by internet charlatans.

Security flaws permeate the entire infrastructure of online
communication, from your personal computer to the largest corporate
websites and the interconnections that define the Internet or
worldwide web. These flaws are largely software- and communication-based,
although hardware can on rare occasions be compromised. Many flaws or
vulnerabilities present themselves by virtue of the complexity of
operating systems, the simplicity of communications protocols, the
failure to periodically perform software updates, and the propensity of
internet users to utilize anonymously-sourced free and pirated software.

Financial houses such as banks, lenders and brokerages and government,
defense and security agencies and firms all take great pains to insure that
their systems are highly secure. But weak links in communications can
compromise the most secure systems, as a major security firm recently
discovered through absolutely no fault of its own. Internet hackers
invaded an internet node (communications hub) that fed into the
company’s secure system, modified addresses to divert company
traffic, established a fictitious shadow copy website (an
internet practice known as spoofing) that mimicked the
company’s actual website, then defaced that website to make it appear
that the security company had been hacked. In fact, nothing of
the sort had happened; the company’s systems were secure. But
their communication channels were vulnerable to attack. While
it is doubtful that the hackers could in this case obtain confidential
information because such information was encrypted, the point of the
attack was to damage the company’s reputation.

While this is an extreme case, it serves to point out that every system has
its weaknesses. When vulnerabilities are exascerbated by lax security
precautions, poorly-designed software and lack of knowledge by consumers
regarding the danger and procedures necessary to properly secure systems,
they can be exploited by hackers and thieves with maximum effect.
Typically, these individuals target the weakest and easiest points of
attack. Guess which targets are most vulnerable. If you ventured to
guess that you, the consumer, and your computer are most likely to be
targeted, you are correct.

If you feel you are performing your day-to-day internet transactions in a
diligent manner without risk of compromise, ask yourself the following
questions:

Do I ever respond to emails that promise fantastic opportunites such
as, “Get rich working at home!” or “Mortgage rates
as low as 1.5%”?

Have I ever clicked a link in an email from an unfamiliar source
because I was curious?

Do I open email attachments without first scanning them for viruses?

Do I trust that email attachments from my friends are virus-free?

Have I ever sent my username and password to a friend in an email?

Do I frequently surf numerous unknown websites?

Do I download free software without properly investigating its source,
relying on the issuer to be honest and competent?

Do I install software appliances such as toolbars because they come
from sources that appear reliable?

Do I use pirated software?

Do I utilize an always on cable connection to the internet?

Do I always check to insure that I am on a secure connection (SSL or
equivalent) before filling out internet forms containing personal
information? If the connection is not secure, do I refuse to provide
the information?

Does my ISP utilize a filtering mechanism to screen out spam?

Do I run the latest version of my computer operating system and
regularly check for and install security updates and patches?

Have I installed antivirus software and is its database of virus
definitions up-to-date?

Do I routinely scan my computer for viruses or is my antivirus
software set to do this automatically (at a time when the computer
is running)?

Is my antivirus software capable of scanning incoming email?

Have I installed a software package capable of detecting and removing
spyware?

Have I installed firewall protection and do I know how to properly
configure it?

Do I ever disable my firewall so that I can perform a download or play
an interactive game?

Do I have a hardware firewall?

I’ll bet I caught you on at least one of the above security issues.
It is nearly impossible not to place yourself and your personal
information at some degree of risk when using the internet. Knowing the
dangers and taking steps to curb them will go a long way toward reducing
that risk. Unless you refuse to connect your computer to the internet,
you cannot avoid doing internet business, nor should you. The
internet is a powerful productivity tool. To protect yourself on the
internet, use common sense, avoid being gullible by refusing to jump
at exceptionally generous offers or respond to unknown solicitors, and
do the following:

Never, EVER, respond to ANY email solicitation for any sort of
financial transaction. The majority of email solicitations are
bulk mailings of a highly dubious nature. Some of these simply seek
to confirm that your email address is active by attempting to gain a
response from you, after which your address will be sold to other
email solicitors. Others are more sinister phishing
expeditions. Phishing is a tactic whereby you are coerced
into providing personal information which may then be sold to other
lenders or used for the purpose of identity theft.

If you receive an email from a known institution or one with which
you routinely do business that solicits financial or personal
information, you should call the institution or log on to your account
THROUGH THEIR WEBSITE. DO NOT use any link within the email,
which could link to a false website. Find out whether the financial
institution has actually solicited this information and report the
suspicious activity to them if they have not. NO BONA FIDE FINANCIAL
INSTITUTION WILL EVER SOLICIT PERSONAL INFORMATION THROUGH AN EMAIL
LINK; they will instead ask you to go to their website
independently to complete the transaction.

At a minimum, invest in a good spyware blocker to help secure
personal financial information on your computer. A firewall is also a
good idea, but start with a spyware blocker to help prevent
keystroke logging, a method by which information you enter
into your computer can be transmitted to a remote location without your
knowledge. We use
Spybot Search & Destroy, an absolutely
free spyware blocker which just happens to be one of the best
available, and update it regularly. If you choose this spyware
blocker, additionally install the TeaTimer resident program,
which will constantly monitor your computer and alert you to any
unauthorized spyware-related activity.

Insure that any lender or financial institution with which you
choose to make inquiry or do business either has a brick-and-mortar
location (physical office with real address and phone number, not
a postal drop or answering service) or is VERY WELL KNOWN. Check
with the Better
Business Bureau® to determine whether the financial
institution is legitimate and whether they have any complaints lodged
against them. It is a good idea to choose a licensed institution
with an established history who belongs to one or more lending
associations and can provide verifiable references. Avoid offshore
institutions; if anything goes wrong, you may have no recourse.

Advantages of Online Credit
Services

Provided that you take proper precautions to safeguard your personal and
financial information and choose a good online financial institution,
online credit services can have significant advantages. Convenience is
perhaps the biggest advantage. There is no shortage of online lenders
and brokers on the internet today, all competing for your business, as
well as many consumer information sites seeking to counsel consumers about
online credit services and many other consumer issues. This wealth of
information makes it relatively easy to gain an understanding of the
procedures involved in procuring online credit and become an educated
consumer if you have the motivation to do so.

Once you have learned what to look for and look out for with regard to the
type of online credit service you are seeking, you can shop around among
the plethora of online lenders and brokers to identify the company you
feel best suits your needs. Doing so on the internet is far easier
than driving around town to speak with different loan officers or hanging
on the phone for hours waiting for the next service representative.
However, do not rely solely on your internet connection for all lending
information. As you narrow down the playing field, it is a good idea
to call the online lenders you are contemplating and asking them some
questions. Akin to an interview process, this gives you a feel for how
knowledgeable and responsive their employees are, which may in turn
provide some insight into what kind of service you can expect after the
transaction is complete or if a problem occurs.

Brokers and large internet financiers may be able to offer you more
competitive rates than your local bank, savings and loan or credit
union. Take full advantage of this competitive environment; do
not accept the first offer that meets your minimum criteria. Keep in mind
that purely online lenders are not the only players; all major
lending institutions and many smaller ones have an online presence.
Don’t overlook the fact that your local bank may offer online credit
services or at least may provide online information sources which can
help you choose more wisely. Do not simply choose the lending institution
that offers the lowest rate, fewest fees (Always be on the lookout for
hidden fees.), fastest service or asks the fewest questions. Your choice
should be well thought out and encompass those aspects of pricing and
performance most relevant to your current and expected future financial
situations.

After a transaction has been agreed to, you may be able to access your
account information online and may even be able to make payments online
through a secure server. Some financial institutions will charge extra
for this convenience while others consider online account access and bill
paying to be an integral part of their business model. If online
account access or online bill paying are important to you, be certain
before you close the transaction that you are not going to be charged for
these services. Such ongoing fees can add up quickly, and may negate
savings you may have otherwise accrued.

In summary, a variety of online lenders makes the selection of online credit
a viable alternative to more conventional forms of credit procurement, but
a great deal of diligence is required to insure that your personal and
financial information is not compromised. When selecting an online
credit service, two things should be paramount — know the
company you are doing business with and be comfortable with the
credit solution they are proposing. If either of these conditions cannot
be met, you should look elsewhere.

Finally, a note of caution is necessary regarding shopping around for credit
services, especially when doing so online or through a broker. Be
aware that multiple or frequent credit inquiries can reduce your credit
rating, resulting in a less than optimal mortgage solution. If you
must talk to multiple lenders, you may want to take steps to insure that
pulls of your credit records are kept to an absolute minimum.

Authored by Kenneth L. Anderson.
Original article published 5 May 2005, updated 23 February
2006.

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